Mr HOCKEY (Financial Services and Regulation) (10:46 PM) —I would like to thank all the members who have spoken on the Choice of Superannuation Funds (Consumer Protection) Bill 1999 . The bill before the House is an important part of the government's program to foster a strong and secure financial services industry in which consumers can confidently participate—that is, an industry in which consumers are provided with sufficient information to make informed choices and where they can be confident in the competence, skill and professionalism of the industry participants they deal with. This is good for consumers and it is also good for the industry.

This bill seeks to put consumers in a position where they can make informed decisions about life insurance based on appropriate and accurate information. It seeks to ensure that consumers can be confident they are receiving competent and appropriate advice. The bill also provides a legal framework to give backing to the voluntary code of conduct and disclosure regimes currently operating in the life insurance industry. Finally, this bill ensures the availability of appropriate redress for consumers and enforcement avenues for the regulator.

This bill will achieve these objectives by increasing life company and life broker accountability through ensuring the availability of statutory remedies and sanctions and enhancing product disclosure requirements. In addition, the bill will specifically complement the government's choice of superannuation fund legislation by putting in place a legislatively backed consumer protection regime in the life insurance industry. The commencement of this bill is intended to coincide with the start-up of the choice of fund initiatives. The government will consider the appropriate timing for commencement of this bill when a decision has been made in relation to the government's choice initiatives. This bill will play a crucial role in the period prior to the introduction of the Corporate Law Economic Reform Program No. 6 proposals. Ultimately, CLERP 6 will cover the field and provide harmonised conduct and disclosure requirements across all financial products. For this reason, the government has made some amendments to the bill since its initial introduction in 1988 to make it more broadly consistent with CLERP 6.

One issue that I would like address specifically is disclosure of commissions by agents and brokers where they give consumers advice regarding financial products. I consider this form of disclosure to be essential for consumers to make informed decisions about the product they are buying. The underlying purpose of this requirement is to ensure that consumers can ascertain any potential biases or conflicts of interest an adviser may have in recommending one product over another. This information is vital in the consumer's decision making process. The government has made a concession to this requirement in relation to commission disclosure on stand-alone risk products. However, I have indicated on numerous occasions that CLERP 6 will require up-front disclosure of commission on all financial products. There will be no concessions made for specific industry sectors or products.

Coming back to the bill more specifically, the life insurance industry will benefit from these measures. They will foster an improved image for the industry, raise industry standards and reinforce consumer confidence in the industry. As the industry is generally already complying with many of the standards in the bill, which are currently contained in the life insurance code of practice in the voluntary disclosure regime, industry compliance costs should be minimal. The government appreciates the contribution of all of the groups that participated so actively in the preparation of this bill. The reforms contained in the bill will raise industry standards of service and advice and give consumers greater confidence when choosing products offered by the life insurance industry. The reforms will also contribute to creating a world-class financial services industry in Australia.

Before I commend the bill to the House, I would just like to respond to some of the missives of the shadow Assistant Treasurer. The shadow Assistant Treasurer said that the bill may be extending beyond what the title suggests because it does not refer to superannuation. Thirty-three per cent of the superannuation sold in Australia is sourced from life companies. To put things into perspective, what we are attempting to do here is have the same disclosure regime apply to all products that are similar. Putting on my hat as consumer affairs minister, the only way that we are going to be able to reassure consumers that they are getting a fair deal is if there is the same disclosure regime in place for all products, including investment products and the like.

That is the intention of CLERP 6. It is about having one disclosure regime that will reassure consumers that the deal they are getting is a fair deal and that the provider of the product is revealing all the appropriate information and meeting the appropriate standards that will give consumers a proper understanding of the products that they are investing in. For example, if an everyday Australian wants to take out a life insurance product and they go to their life insurance agent, the agent will have to disclose all information about the product, including the fact that that agent might be receiving a commission from a company. Let us take AMP as an example: they will have to disclose that they are getting a commission from AMP to sell an AMP product.

Two weeks ago, I addressed the National Insurance Brokers Association on the Gold Coast. The brokers were extremely agitated, and that is an understatement. Having been involved in the issue of aircraft noise in Sydney, I can only say that the brokers were equally upset about our disclosure provisions. That is because some brokers—not all of them—are very concerned that, whilst they are meant to be providing independent advice to clients, they are receiving commissions from insurance companies, from product companies, that they are not disclosing to their clients. For example, I go to my local insurance broker and say, `I would like to take out a life insurance product.'

Mr Martin Ferguson —You're a bad risk!

Mr Kerr interjecting—

Mr HOCKEY —I am a very good risk. I do not see you in the gym every morning, Martin. Duncan gets there occasionally. And I do not smoke. My friend over there, the member for Indi, is there every morning as well.

Mr DEPUTY SPEAKER (Mr Jenkins) —Order! The honourable member for Denison should cease interjecting or the minister might reveal the results of some of the incidents down in the gym.

Mr HOCKEY —I am a very discreet person, Mr Deputy Speaker.

Mr Martin Ferguson —Larry and I are out on the road, aren't we, Larry?

Mr Anthony interjecting—

Mr HOCKEY —That is right. You are pounding the pavements. I go to my insurance broker and the insurance broker says, `Okay. We would like to sell you a life product. Here is a good product to suit your needs.' It could be an AMP product or a Royal and Sun product, whatever the case might be. What is happening at the moment is that my broker may not tell me that they are receiving an incentive from AMP to sell me the product. I have a perception that I am receiving independent advice, but a secret commission is being taken by the broker as an incentive to push a particular line of product. I see that as a gross breach of faith for consumers. When it comes to this bill in particular—and to CLERP 6 as well—I have a very firm view that we have to put the interests of consumers first. Let there be light.

Opposition members interjecting—

Mr DEPUTY SPEAKER —Order! The minister is straying slightly from the bill.

Mr HOCKEY —I have seen the light, Mr Deputy Speaker. We have put in place a regime that will meet appropriate levels of disclosure so that consumers can have faith that, whatever occurs, they will have all the information that allows them to make a fully informed, independent decision about the best product to meet their needs. Under those circumstances, we are sticking with this bill. We hope that the opposition supports this bill, as we hope that the opposition supports choice of super. Choice of super is a charac teristic that pervades every developed nation that has extensive superannuation services available.

For example, the 401K products in the United States—which give individual workers the opportunity to look at their superannuation plan and make an assessment of whether it is properly invested in equities, real estate, bonds or other products, whatever the case might be—give that individual superannuant an opportunity to consider the details of each of the products and to make a decision about where the products are invested. The most significant savings product decision any individual makes during their entire career—and, for most people, during their lives—is their superannuation. For many people, the investment in superannuation is as big as, if not bigger than, the investment in their home. There is substantial risk associated with the investment that you place in a superannuation company. That superannuation company is managing the most significant physical asset in your life, and that is your superannuation—your life savings for retirement.

So why is it that some parties are opposed to individuals being able to, in the first case, spread the risk across three or four different superannuation companies? Why are they opposed to people varying the risk during the course of their working career? For example, as a young person—and I still consider myself as a young person, in stark contrast to some of the others around here—I would be quite prepared to look at riskier products for my superannuation because I would like to think I still have some years left in my career. I have a capacity to buttress the downside risk associated with greater risk in the investment. The upside is that I can look to broaden the rate of return.

Mr Kerr —I would have a short-term life insurance policy, if I were you.

Mr HOCKEY —As you get to the age of people such as the member for Denison, you would probably want to go into much safer products, as you are getting very close to retirement. You would want to go for those products that are very low risk and therefore have a lower yield.

Mr Crean —What would you recommend—Telstra?

Mr HOCKEY —The member for Batman suggests Telstra shares. It is not for me to comment on the risk value of Telstra shares, but they are a damn good investment because the Commonwealth still has, for example, a huge amount of its assets invested in Telstra.

Mr Crean —I have got shares in Telstra, as have all Australians—51 per cent of them.

Mr HOCKEY —Don't get too carried away.

Mr DEPUTY SPEAKER (Mr Jenkins) —Order!

Mr HOCKEY —Mr Deputy Speaker, they are distracting me.

Mr DEPUTY SPEAKER —The minister will ignore the interjections.

Mr HOCKEY —I am trying to. As you get older you want to look for safer products. Therefore, you should be able to change the balance of your superannuation investment to safer products, less risk, accepting less return. On that basis, you have choice. That is what this government is about: it is about consumer choice, which is a key component of the consumer sovereignty. With that choice people can make decisions about the most important investment in their life—their superannuation.

Why the opposition oppose choice I do not know, except for one fact: their mates in the union industry funds are saying, `If you give choice, then we have to be accountable.' I spoke in Brisbane to an ASFA conference where they hailed me down when I talked about choice and about their role and responsibility to educate the members of their funds about what they were investing in. The ASFA people did not like it. They did not like the fact that they were responsible for telling their members about what investments they were investing their superannuation in. So I can only speculate that industry funds must have something to hide when it comes to choice of superannuation.

We want competition. We want people to have greater choice, and especially we want people who are investing their superannuation funds to pay less commission and get a better service from their superannuation funds. The only way to do that is by competition. So this Choice of Superannuation Funds (Consumer Protection) Bill 1999 should really be called the `Superannuation Competition (Consumers are Better Off) Bill'. That is what it should be called because these bills are dealing with consumer choice, they are dealing with consumer sovereignty, and that is why we support appropriate disclosures. Better informed consumers make better choices and decisions that are going to affect their most significant lifetime investment—their superannuation.

Amendment negatived.

Original question resolved in the affirmative.

Bill read a second time.